by John McCarthy Consulting Ltd. | Feb 22, 2025 | Blog, News
Our firm carries out many cold file reviews of audit files and comes across many varieties of audit file weaknesses with varying degrees of seriousness.
In the following series of blogs, we are going to highlight the more typical audit file weaknesses that we encounter.
We will also indicate some key tips that will:
- save time and effort in producing more effective audit files; and
- ensure that your firm is better prepared for its next regulatory inspection.
Audit Planning (ISA 300)
What a logical place to start?
Planning the audit properly is the key to an efficient and effective audit assignment. This is one of the areas which is often poorly documented. In most audit teams knowledge of the client, their business and associated risks among the team is good, yet the documentation of this is often too brief (e.g. missing an organisation chart) and does not fully embrace the requirements of the recently revised risk and fraud ISAs (ISA 315 and ISA 240).
Tips for a better audit file
The planning memorandum should summarise:
-
- The key matters to be addressed in the audit;
- The detailed tests that will be performed in these areas;
- Materiality levels set – don’t follow the previous year materiality levels blindly, especially if the results are showing losses or a break-even, instead of profits;
- Stocks – Include a map of the warehouse location, photographs of the more expensive stock items (with an explanatory index);
- The names of the 5 largest suppliers/customers
- Names of key management personnel and years of service;
- Related parties – especially dormant ones i.e. those that qualify as related but have no transactions/balances with the audited entity yet.
More weaknesses and tips next week.
For more on engagement and representation letter templates and a variety of CPD webinars on money laundering and other accounting/audit related topics, please go to our website for:
ISQM TOOLKIT, or if you prefer to chat through the different audit risks and potential appropriate responses presented by this new standard. We typically tailor ISQM training and brainstorming sessions to suit your firm’s unique requirements. Please contact John McCarthy FCA by email at john@jmcc.ie.
by John McCarthy Consulting Ltd. | Feb 16, 2025 | Blog, News
In March 2024, the Financial Reporting Council (FRC) completed the Periodic Review of FRS 102, following a consultation period. The principal effective date of the periodic review is 1 January 2026.
What this means for the Charities SORP
The drafting of the new SORP is being speedily progressed based on the final FRS 102 amendments. The new SORP will be subject to a 3-month consultation period which is anticipated to go live early around March 2025. It is likely that the new SORP will be published no later than Autumn 2025 for an effective date of 1 January 2026.
The expected SORP timeline is set out below (extract from the charity SORP website.)
| Mar-24 |
|
Jan-Mar 2025 |
|
Jun-Jul 2025 |
|
Mar-25 |
| FRC issued amendments to periodic review of FRS 102 |
|
FRC approval of draft SORP and consultation |
|
Review consultation responses and update SORP as necessary |
|
Publish SORP for 1 Jan 26 effective date |
|
Mar-Dec 2024 |
|
Mar-25 |
|
Aug – Sep 2025 |
|
|
SORP drafting to update SORP for FRS 102 and wider SORP review |
|
12-week Consultation |
|
FRC Approval of final SORP |
|
Further updates are expected soon on the Charity SORP website.
For more on engagement and representation letter templates and a variety of CPD webinars on money laundering and other accounting/audit related topics, please go to our website for:
ISQM TOOLKIT, or if you prefer to chat through the different audit risks and potential appropriate responses presented by this new standard. We typically tailor ISQM training and brainstorming sessions to suit your firm’s unique requirements. Please contact John McCarthy FCA by email at john@jmcc.ie.
by John McCarthy Consulting Ltd. | Jan 31, 2025 | Blog, News
In last week’s blog we discussed the CPI, or the Corruption Perceptions Index (CPI) often used by MLROs as a supplementary tool to assist in their understanding of money laundering risks in overseas territories.
There are other tools available to MLROs and senior staff in accountancy firms which can also be of great assistance in assessing whether natural persons or other legal entities are in any way connected to high-risk third countries (HRTC). Applying enhanced due diligence is normally recommended in dealing with such countries.
HRTC is defined as: ‘a country named on either of the following lists published by the Financial Action Task Force as they have effect from time to time—
We strongly recommend that accountants access this website on a regular basis (the list changes three times a year) as the current HRTC will change again after the FATF Plenary meeting in February and will change in June and October 2025.
For more on engagement and representation letter templates and a variety of CPD webinars on money laundering and other accounting/audit related topics, please go to our website for:
ISQM TOOLKIT, or if you prefer to chat through the different audit risks and potential appropriate responses presented by this new standard. We typically tailor ISQM training and brainstorming sessions to suit your firm’s unique requirements. Please contact John McCarthy FCA by email at john@jmcc.ie.
by John McCarthy Consulting Ltd. | Jan 31, 2025 | Blog, News
The CPI, or the Corruption Perceptions Index (CPI) is (according to the publishers Transparency International) the leading global indicator of public sector corruption and provides a comparative snapshot of 180 countries and territories. It is often used by MLROs as a supplementary tool to assist in their understanding of money laundering risks in overseas territories.
The next index, which will be for 2024, will be published on 11 February 2025 at this link.
Transparency International (TI) is a Berlin based non-profit organisation set up by former employees of the World Bank. The index is calculated using data from 13 external sources (including interviews of businesspeople around the globe) and scores countries out of 100, meaning that the higher the score, the lower the level of corruption is in the country. In the 2023 index, Denmark came out best with a score of 90.
Ireland has a score of 77 out of 100 in the 2023 index, with no change since 2022, meaning it ranks 11th out of 180 countries.
In its 2023 report it criticises the lack of access to the Irish RBO register about companies’ real owners which was significantly restricted for civil society and journalists across the EU. It states ‘Ireland for example, currently requires journalists and activists to provide not only proof that they are engaged in anti-money laundering work but also demonstrate that a company of interest is connected to financial crime. In practice, this may hinder most access requests as this approach expects applicants to already know the very information they are seeking to uncover. With Ireland’s importance as a financial centre growing, the country needs to ensure utmost transparency in the ownership of all types of vehicles that are currently vulnerable to abuse.’
For more on engagement and representation letter templates and a variety of CPD webinars on money laundering and other accounting/audit related topics, please go to our website for:
ISQM TOOLKIT, or if you prefer to chat through the different audit risks and potential appropriate responses presented by this new standard. We typically tailor ISQM training and brainstorming sessions to suit your firm’s unique requirements. Please contact John McCarthy FCA by email at john@jmcc.ie.
by John McCarthy Consulting Ltd. | Jan 28, 2025 | Blog, News
In last week’s blog we looked at higher risk clients and PEPs in particular, who might present a higher ML risk to the accountancy sector.
One of the most reliable sources to help identify such risk, especially in the case of new clients is the Accountancy AML Supervisors Group Risk Outlook (updated July 2024) which outlines some circumstances where there might be higher risk of money laundering or terrorist financing in the accountancy sector.
This week our focus is on other client sectors that might present particular risks over and above other clients. According to the AASG, these include:
- arms dealers;
- property transactions with unclear source of funds (including remote sales);
- transport/logistics businesses;
- legal services;
- art market participants;
- financial services; and the
- luxury goods market.
Sectors such as the arms trade can be linked with corruption, money laundering or terrorism. Large property transactions, where the source of funds is unclear, have also been linked to laundering the proceeds of crime.
There is existing HMRC guidance on Understanding risks and taking action for estate agency and letting agency businesses provides further red flag indicators. Firms should also ensure that where overseas entities own UK property, the beneficial owner must be properly recorded on the Overseas Entities Register and assess the risk that a client may try to transfer ownership to avoid registering their beneficial ownership.
There has been a rise in cases reported in the press where transport and logistics businesses have been involved in modern slavery and human trafficking cases. These businesses have the potential to be involved in smuggling (e.g. alcohol, fuel, tobacco etc.).
Legal services, art market participants and financial services are ranked as being at higher risk of money laundering, along with luxury goods markets (high value goods sold for, cash exceeding €10,000 in a single or linked series of financial transactions) which can provide a route to transfer value or assets from sanctioned individuals to avoid international sanctions.
Firms should employ sufficient professional scepticism when performing services or analysing the books and records of clients in the above sectors.
For more on engagement and representation letter templates and a variety of CPD webinars on money laundering and other accounting/audit related topics, please go to our website for:
ISQM TOOLKIT, or if you prefer to chat through the different audit risks and potential appropriate responses presented by this new standard. We typically tailor ISQM training and brainstorming sessions to suit your firm’s unique requirements. Please contact John McCarthy FCA by email at john@jmcc.ie.
